(Bloomberg) -- The European Central Bank should be able to lower borrowing costs if economic data don’t deliver a negative surprise, according to Bundesbank President Joachim Nagel.
“If the figures remain the same over the next twelve months, there might be a chance that we can reduce interest rates further at one or the other meeting,” the German central banker told reporters in Rio de Janeiro on Thursday.
Speaking on the sidelines of a gathering of Group of Twenty finance chiefs, Nagel said that the ECB isn’t on “autopilot” when it comes to rate cuts and highlighted that “you just have to be patient and, above all, keep your monetary policy in restrictive territory until inflation has reached a stable level of 2%.”
The ECB last week kept rates on hold, with President Christine Lagarde saying that the next policy meeting — on Sept. 11-12 — is “wide open.” While markets are counting on two more rate reductions this year, policymakers are becoming less confident such a path is realistic, and don’t want investors to assume that a cut at the next meeting is a done deal, people familiar with the matter told Bloomberg.
Nagel stuck with the ECB’s line that policy will be decided meeting by meeting and warned against precommiting on what might happen in September.
Others have been more outspoken. ECB Vice President Luis de Guindos said earlier this week that the next Governing Council will be “more convenient” for decision making that the most recent one, and Slovakia’s Peter Kazimir said that while not the baseline scenario, market bets on two more 2024 rate cuts aren’t “entirely misplaced.”
Similarly, Portugal’s vice governor — Clara Raposo — told Bloomberg that the ECB will probably be able to lower its deposit rate twice more this year.
Nagel, who one of the more hawkish Governing Council members, highlighted that euro-area wage developments continue to be “very robust” and said the return to 2% inflation will be “bumpy” — echoing earlier comments.
Still, he acknowledged that the “greedy inflation beast” no longer exists.
(Updates with other policymakers starting in sixth paragrah)
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